How Having The Nerve To Win Will Improve Your Trading Results

As a huge sports fan, April is a great time of the year because two of my favorite sporting events happen during this month. First, the March Madness college basketball tournament finishes with the final four teams meeting for a chance at competing for the championship (and then of course the final game which is always a nail-biter). Secondly, the Masters golf tournament is played in the middle of the month, and as is the case in most of these events, this year’s tournament was as competitive as ever. I’ve always loved competition, and find great fun in watching athletes compete.

This competitiveness can be directly translated into the trading arena as most successful traders are intense competitors that love to win. But just like in sports they know that they can’t win all time. Traders need to have that competitive spirit, as trading is an exchange of money between those that have a plan and execute it with discipline, and those that don’t. Unfortunately, lots of new traders don’t realize this until they’ve lost all their money to their competition.

There are many analogies in trading that we can draw from the game of golf. Trading, like golf can be a solitary endeavor ( just you and your wits). Also, in both undertakings the end result is directly attributable to ones individual efforts. There is no one to blame for poor results other than the practitioner itself. Conversely, a job well done is also as a result of good planning and execution. We can look for advice from others, or someone to tell us what, and how to do it. But at the end of the day, we are the ones that have to pull the trigger, and live with the results.

As I was watching the final round of The Masters on Sunday, Nick Faldo — 3-time Masters champion and commentator— made the comment that in the last nine holes of the tournament, it’s the player that can hold his nerve that will be the one that wins. In other words, the player that keeps his cool under extreme pressure will come out victorious. We’ve seen this often where extremely talented professional players buckle under the tremendous pressure that occurs in a championship setting. They end up missing a short three- foot putt, or a seemingly routine drive into the fairway ends up in the water hazard. All the great champions have this quality of keeping a cool head while everyone around them succumbs to the pressure of the moment.

This can also be said of great traders; they stay focused and are not deterred when they’re faced with the evitable setbacks that are part of trading. Like a great golfer who can come back and birdie a hole after just double bogeying the previous one. It takes the same mental fortitude to bounce back from a string of losses. It also takes mental strength to stay with a trade for a big profit rather than bailing out to soon with a small profit. Consistency is also one of the hallmarks of a great golfer. In a golf tournament; you have to play well all four days, not just one or two in order to win. Similarly in trading , one has to stay consistent with a proven strategy, day in, and day out.

The lesson here is that no matter what you do for a living, if you want to do it great you have to have the nerve to win. This can mean different things to different people, but in its essence it means taking risk, doing things that most people won’t do, being accountable, and staying calm when things are not going well. All this cannot be done alone, some coaching and mentoring can be helpful. Most people don’t realize that Tiger Woods— arguably the best in the world to ever play the game— still utilizes three coaches. Learning to trade is a skill, and as such, this skill needs to be continuously honed much like a golfer. So for those of you that want to be better traders, a good start would be to get some lessons from a Pro, just like you do at your golf club when you want to improve your swing.

Until next time, I hope everyone has a great week.

Written by Gabe Velazquez. Gabe got his start in the markets as a broker trainee for Paine Webber, a mere 3 months before the market crash of 1987. He witnessed the gut wrenching fear of investors during that time period and the wild speculative euphoria of the late 90’s. That experience brought to light the importance risk management plays in trading and investing. In fact, it’s greatly influenced the way he trades today. He spent 15 years as a stock and commodities broker, conducting technical analysis seminars through-out Southern California. After many years of managing other people’s money, Gabe now concentrates full time on trading his own portfolio and teaching. Students will benefit from his first hand experience of daily involvement in the market. He brings with him an acute awareness and understanding of how the markets really work. Articulating this knowledge clearly, succinctly, and with enthusiasm is something students can appreciate. This gift for communicating was honed through many years of public speaking.

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